IKAR in Mass and Industry Media

IKAR: Domestic sugar price-supply relationship model

IKAR

Sugar is highly price inelastic product. Recent IKAR study, made in conjunction with the Russia-Belarus sugar contest strongly confirms this theoretical view.

Our analysis provides the following conclusive model.

http://www.ikar.ru/i/lenta_05_12_01_2.gif>

We are interested in the coefficient attached to average monthly supply. The minus and value of it mean that price will fall by 50 cents for every 12'000 tons imported during the year. Roughly to say, ceteris paribus, every 24 th. of imported sugar cause $1 price fall on the domestic market.

But price can fall to the lower stage in the case of more intensive intervention of imported sugar to the market in any fixed month. And this case is aggravated by seasonality of market supply and latent funding that bring to delivery for prices that are lower then current market ones.

Let's plot a graphical analog of the model for obviousness. In full presentation a graphical analog of the model looks as the plane in three-space. But for achieving the purpose of research we are interested in the section with the constant value of average monthly demand (let it be 500'000 tons) only. The graph is as follows.

01.12.05

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